“How Do I Avoid Probate?”
As an estate planning lawyer, I have the benefit of talking with hundreds of people about their hopes for the future, especially their children’s futures. In all of those conversations, I have never had a single person say, “Boy, I really hope my hard-earned assets get tied up in a court proceeding for months or years after I die.” But, this is exactly what will happen with most people’s assets they pass because most folks will not take the proper steps to avoid a common legal proceeding known as “probate.”
The probate process is a legal proceeding by which the court tries to determine whether someone who has died has a will, what assets they have, and to whom those assets should be distributed. In Arizona, probate comes in two flavors, informal and formal. An informal probate is for smaller estates (generally less than $75,000) and estates unlikely to have any disputes among the heirs. The costs for these types of probate proceedings are relatively low, and the state requires very little oversight of the estate representatives in the administration of the estate. Most of these cases get resolved with only a couple of court filings and less than $1,000 in expenses.
Not many of you reading this, though, will qualify for this kind of probate proceeding because your wise investments and ambition mean that your estates will likely exceed the cap, or there are creditors or disputes that disrupt the simple administration, thus requiring additional court oversight. If your estate falls into the formal probate category, the process not only costs more, but it also takes more time to resolve.
An informal probate averages between six and eight months, whereas a formal probate can easily double that time. The costs for a formal probate can reach beyond $5,000 or even $10,000 for a $500,000 estate and can go much higher if your estate is contested or worth millions. If there exists a relatively inexpensive and simple way to avoid this process, you would think that most people would take advantage of it in order to save their family members the time and expense of going through the probate process.
Trusts are a fantastic way to avoid the probate process. Unlike a will that only takes effect after you die, a trust becomes an active legal arrangement as soon as it is signed. As a result, the court doesn’t need to verify a trust like it does a will. The entire probate process is already built into the trust document. While there is generally a higher initial cost to set up a trust than there is to draft a will, a trust more than makes up for it in the probate costs avoided and time saved having your estate neatly buttoned up. There are other benefits to a trust, as well, including greater asset control, creditor avoidance, and potential tax advantages. But for probate avoidance, the trust is king.
If you have questions about setting up a trust or want to review an existing trust or estate plan, please contact Phocus Law.
by Samuel C. Richardson, Attorney, Phocus Law